Building Economies, Not Bombing Economies Eurasia: Some Personal Impressions of Emerging China

I want to share with readers my impressions and experiences on a recent trip through several parts of the Peoples’ Republic of China. I made the journey this June as part of my research for a forthcoming book on the Eurasian Century, my term for what is emerging as an alternative to a war-crazed West.

Today’s China is far more complex than simply being the world’s great economic colossus, the so-called “workshop to the world.” Yet despite serious problems with the development path the country’s Communist Party leadership took beginning in 1979, when Deng Xiaoping opened China to foreign investment and a global market with a pragmatic market economy whose slogan was “Socialism with Chinese Characteristics,” China today is the key to any future positive world economic growth in a peaceful context. Unlike Trump’s demagogic slogan, “Making America Great Again,” China’s OBOR infrastructure undertaking is no demagoguery. It’s very richly real.

Following a series of private discussions with Chinese experts at leading universities and think tanks in Beijing regarding the vast and changing complexity of the now Six Corridors of the One Belt, One Road port and land infrastructure complex under construction, my journey took me to the “origin” of the ancient silk route.

I went to the central China city of Xi’an, some 1,200 kilometers west from Beijing. The Han Dynasty Emperor, Zhang Qian, opened the overland trade route more than two thousand two hundred years ago to trade valuable Chinese silks with the Mediterranean and the Roman Empire. It was named the Silk Road in the 1870’s by the noted German geographer Ferdinand von Richthofen. The trade route linked the then-highly advanced cultures and civilizations of China, India, Persia, Arabia with Greece with and Rome.

It’s important for Western observers to realize that this very old history is very living and real for the cultural memory of today’s China. It’s not at all forgotten, and it shapes very much the vision of the OBOR initiator, President Xi Jinping. It is clear to me after many conversations with Chinese of all backgrounds that they realize acutely how significant the potential of this OBOR development is becoming to lift the world out of ever-more destructive wars into a long term period of rising living standards and peace.

Today’s Chinese are also acutely aware of the fact that the West and her allies used opium to loot and destroy China from the time British and American trading companies launched the 1840 Opium Wars, until the founding of today’s Peoples’ Republic of China by Mao Zedong in 1949, with the defeat of the opium-pushing Japanese occupation and the opium-running Koumintang of the US-backed dictator, Chiang Kai-shek. In part, today’s “opium” takes the form of Gucci handbags and Buick autos and iPhones—all made in China.

The Essential Grand Vision

Nothing noble can be built up without an essential grand vision. This the OBOR clearly has.

First it’s unmistakable that China envisions the multi-nation OBOR project as an integral part of moving the world away from what they see as the tyranny of a dollar world. OBOR is far more than a few ten thousands of miles of high-speed rail track or some new deep water container ports around Asia. As they rightly see it, so long as the US dollar remains the key reserve currency for the vast value of world trade, world central banks will be forced to accumulate dollars to purchase oil, commodities, machinery even gold and to unwillingly finance America’s wars, wars ultimately against their own national interests, whether against Iran or Qatar or North Korea.

As the dollar broke the link with gold in August, 1971, the only control on the supply of dollars, on dollar inflation, has been the US Treasury and the closely-linked Federal Reserve. Since 1971 the US Government has enjoyed the luxury of running unending Federal budget deficits with low interest rates because nations like Japan, China, Russia or Germany, would have no choice but to convert their trade surplus dollars for interest-paying, “safe” US Government debt. So long as Saudi Arabia and Arab OPEC oil producers followed the demand of Washington to accept only dollars for their oil, Washington could perversely finance its wars for control of the world over the past near half century, building their globalist world superpower order with such foreign “borrowed money.”

That petrodollar recycling era, as Kissinger originally dubbed it, seemed to work astonishingly well for Wall Street banks and their military industry complex for more than four decades.

Those glory days are drawing to a close, and with it, the unfortunate concept of an American Century created out of the ashes of World War II, as what some call an informal empire, one that has been based on control of debt and of money of other nations.

China is understandably discreet about its views of displacing the dollar with the Renminbi. Nonetheless, it is clearly integral to the OBOR strategy. And that would be very positive for the world as Washington would be forced into real choices between guns or butter.

A leading Chinese academic involved in the conceptualization of OBOR and who is close to the state planning organization told me in private remarks in Beijing that China is carefully building a foundation of a Renminbi unit of account in world trade alongside the dollar, “by filling in the blank spots where the dollar does not dominate.” He noted a critical difference between the economy of China and that of the Federal Reserve and US Treasury: “The US dollar today is not mainly for goods trade, but for trading debt.”

The Chinese economics expert then pointed to the fact that Iran no longer sells its oil to China in dollars; that China and Russia use their national currencies to settle energy purchases, and that even Qatar, home of Washington’s largest military base in the Middle East, sells its LNG to China in renminbi, not dollars.

China’s recent membership in the select five-nation IMF currency club of SDRs, he pointed out, is primarily a means of gaining more acceptance in other countries and markets for trade directly in renminbi, not dollars. “Broadly said,” the Beijing economist stressed, “the United States trades in fictitious money–derivatives, options, making money out of money. China trades in physical goods. This difference is behind the Silk Road idea.” He stressed the view in Beijing that the “US dollar is basically a tool to loot real economies. We need a changed economic system based on trade in real goods. This is what OBOR is about. The purpose of building high-speed train links across Eurasia is not to steal markets, but to build networks of trade to link real economies and build entire new markets.”

Belt and Road Sites

My next stop was Xi’an, a bustling beautiful modern city of more than 9 million. It is most known to the world as home of the recently-unearthed Terracotta army ruins. Today the city is home to major research and development labs, to installations of national security, and China’s space program.

Xi’an is also home to the largest railway terminal in Asia, a high-speed terminal with China-build high-speed, sleek trains constantly coming and going in every direction towards Mongolia, Beijing, Kunming in the South to Kazakhstan and Russia on to the EU. The Xi’an high-speed terminal building was completed in 2011, and is one of the most modern I’ve seen anywhere, with fully electronic departure/arrival information in Chinese and English.

From Xi’an my journey took me to see one of the new deep water ports being developed as the “belt” component of the One Belt, One Road. The port was Qingdao, in Shandong Province on China’s east coast opening to the Yellow Sea on a parallel with South Korea.

Qingdao itself is another modern city of more than 9 million. The city Qingdao has been a designated Special Economic and Technology Development Zone (SETDZ) since 1984, and is now China’s tenth city in terms of annual GDP.

The harbor of Qingdao consisting of Dagang Port Area and the Qianwan Container Terminal, at present is China’s fourth largest port. It is already handling more annual freight container traffic than the ports of Hamburg and Antwerp combined. In 2015 Hamburg, Germany’s largest port, handled 9-10 million TEU of containers. Qingdao did 18 million TEU.

The Qingdao port is presently undergoing a massive expansion in the context of the OBOR sea lane development. It can handle the world’s largest container ships as the first fully-automated container port in Asia. The port also is linked by rail to the EU markets via Russia. I was told by Port authorities that the present sea route to Europe from Qingdao takes much longer, 40 days compared with 15 days by rail. However rail costs per weight about twice as much. The strategy then is to ship low value added bulk commodities by sea and high-value such as computers, smart phones and such by rail.

The port complex is an all-purpose fully-automated harbor able to handle raw commodities such as iron ore, coal, oil or even LNG from Qatar and elsewhere. The port, outside the City is connected to the industrial city center by a 41 kilometer long bridge,Qingdao Haiwan Bridge, part of the Jiaozhou Bay Connection Project, the world’s longest bridge over water, completed in 2011.

Asia Pivot was Catalyst

The year 2011 is not coincidental for seeing a major shift in China’s geopolitical infrastructure economic plan. In November 2011 the Obama Administration proclaimed what it called its new “Asia Pivot” foreign policy, one of the more ill-conceived US foreign policy initiatives. It was announced in an article by Secretary of State Hillary Clinton in Foreign Affairs, the magazine of the Council on Foreign Relations. The Obama Asia Pivot included a definite military component with focus on, “…defending freedom of navigation in the South China Sea, countering the nuclear proliferation efforts of North Korea, or ensuring transparency in the military activities of the region’s key players.”

As that Obama Asia Pivot policy was read in Beijing, combined with the Obama anti-China Trans-Pacific Partnership trade talks, it was viewed as a US move to militarily and economically contain China.

In 2010 something the Pentagon called its Air-Sea Battle Doctrine–developed by the infamous Andrew Marshall, then head of the Pentagon’s Office of Net Assessment–became official doctrine of the Pentagon for possible military confrontation with China. Obama’s Secretary of Defense Robert Gates openly spoke of the need to counter China’s growing military capabilities. In this context, in 2010 the Obama Administration declared that freedom of maritime navigation in the South China Sea,–claimed variously by China, Vietnam, Brunei, Taiwan, Malaysia, and the Philippines—was suddenly, “a US national interest.”

That Obama Asia Pivot clearly in retrospect was the event that catalyzed what is today the One Belt, One Road multi-trillion dollar international series of economic infrastructure projects that are transforming the economic space now of the entire world economy.

In November 2012 Xi Jinping was elected General Secretary of the Central Committee of the Communist Party of China, in a tense succession debate on policies under the successor to Hu Jintao. Xi was named President of the Peoples’ Republic of China in March 2013. In that September, Xi Jinping went to Kazakhstan where he first announced his vision “to join hands building a Silk Road economic belt with innovative cooperation mode and to make it a grand cause benefiting people in regional countries along the route.”

Five months later, after Washington pulled off what Stratfor’s George Friedman called “the most blatant coup d’etat in US history,” toppling the Russia-friendly elected Ukraine President Viktor Yanukovych with a gaggle of Russo-phobic oligarchs and neo-nazi thugs, Russia began an historic pivot of her own, the pivot towards strategic cooperation with China and with China’s new Silk Road.

Perhaps the ill-tempered State Department neo-con Victoria Nuland ought to be credited. Her stupidity and that of her colleagues in the Obama Administration made possible Zbigniew Brzezinski’s worst geopolitical nightmare: the coming together of the nations of Eurasia in a peaceful economic cooperation that will dwarf the stagnating, debt-bloated economies of the United States and that of most of the EU. We do really live in interesting times.

F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine “New Eastern Outlook.”